Later today, Elon Musk’s company SpaceX is expected to raise $75bn by selling shares to investors at what may be the largest initial public offering (IPO) in history. According to the prospectus for the share offering, SpaceX is primarily an AI company, and it contains xAI, which is also a social media company, but it’s also nominally a rocket company that plans to build cities on other planets. Whatever it really does, it also has another purpose: to create a such a massive presence in the market that your money – your retirement savings, your pension – is drawn inexorably towards it, whether you like it or not.
Many people in Britain are going to be unhappy with the idea that their pension will help make Elon Musk a trillionaire. Two thirds of UK voters polled by Survation in December 2024 (including a majority of Reform voters) believe he should not be influential in British politics. You might not drive a Tesla or use X, and you might content yourself that you would never give money to a centibillionaire known for giving straight-armed salutes at political rallies. But you’re going to anyway.
The reason for this is that shortly after SpaceX begins selling shares, it will be included in major stock market indices, such as the Nasdaq 100 or the MSCI Global Equity Index. Each index is basically a basket of companies, typically with more weight given to those that are more valuable or have a higher price. So, the Nasdaq 100 contains 100 companies, but most of them make up less than 1 per cent of the index, while Apple, which is valued at more than $4 trillion, makes up more around 11 per cent of the index. So if you invest £100 in a “passive” fund that simply tracks the Nasdaq 100, about £11 of it is effectively invested in Apple. And you almost certainly do, because over the last 30 years, passive investing has become the norm for huge swathes of the world’s retirement savings. UK savers have more than £3 trillion invested in passive funds; Americans have around $21 trillion invested in them.
This is useful to you – it provides the growth that helps your retirement savings outpace inflation – but it’s also useful to Elon Musk. It means that the bigger a company grows, the more investment it can expect to attract, automatically, from the funds that track indices. You’re already invested in Musk, because you almost certainly have some indirect ownership of his car company, Tesla, through the funds in which your savings are invested. If SpaceX achieves its predicted valuation of $1.7 trillion, it will also have a significant weight in many indices, and so the money your pension fund manager has placed in index funds will flow towards it, whether you want it to or not.
Even if you’re not fussed about Musk’s politics, you might still wonder if this is the best company to invest in. The SpaceX prospectus tells two stories: one is wildly ambitious, and the other is insane. The first (more believable) story is that the company is going to make vast sums of money from AI, which the prospectus refers to as “a total market opportunity of $26.5 trillion”. That’s equivalent to more than a fifth of all the economic activity in the world today. Industry – all of it, every factory, refinery, power station, every mine and building site in the world – makes up a quarter of global GDP. Or to put it another way, SpaceX is claiming that if it were to fully capture the value of its market, it would make a lot more money than Europe (a continent of 450,000,000 people).
This does sound rather ambitious for a business that has never made a profit, and which lost $5bn last year. But it’s credible compared to SpaceX’s further ambition to “harness the sun to power a truth-seeking artificial intelligence that advances scientific discovery, and ultimately to build a base on the Moon and cities on other planets”.
Certainly, “cities on other planets” sounds like an economic opportunity. Greater Tokyo, the world’s most populous urban area, is home to 41 million people and has an economic output of $1.7 trillion. But to believe that SpaceX can create a similar economy on Mars, you would also need to believe that millions of people can be persuaded to move from our planet, which has terrific amenities including a magnetic field and an atmosphere, to a vast desert of toxic minerals with background radiation 200 times greater than on Earth. These people would have to be rich, because the flight alone would cost hundreds of millions of dollars, and they would have to be extremely committed, because that flight lasts up to six months (using current technology), and they would have to be insane, because on Mars they would have to remain indoors – and probably underground – for the rest of their lives.
Having considered these points, you might want to know how to find out how much exposure your retirement savings have to SpaceX, and possibly to opt out of helping Elon Musk to amass even more wealth and power than he already has. Well, you can’t. It is not realistic for someone with a typical workplace pension to find out which of all the underlying assets in their fund might contribute towards investment in SpaceX. Even if you could, there’s nothing you can do about its inclusion in those indices – a number of indices have actually changed their rules to ensure that SpaceX is included more quickly – or the funds that passively invest in them. The only option to ensure a SpaceX-free portfolio is to move to actively managing all of your own investments, which is a terrible idea. Almost all (about 90 per cent) of the qualified professionals who actively choose investments fail to beat the market. It would be a lot of work and you’ll probably end up with less money than if you left it to the market (maybe less money overall).
All you can really do is to recognise what Elon Musk is really selling you, for the money you’re almost certainly giving him. What you’re buying is not really a piece of a rocket or a datacentre in space, but a principle: volatility. Musk’s abilities as a CEO or an engineer are the subject of some debate, but he is – like his president, Donald Trump – unquestionably good at providing volatility to financial markets. Narrative economics – telling the market an exciting story – are now much more important than fundamentals. It may be bullshit, but that bullshit is growing the assets that will hopefully provide you with an income later in life. Even if you purged your portfolio of Musk-related investments, you would still be subject to this principle, and to one of the golden rules of the global economy: you cannot avoid giving money to bad people.
[Further reading: Nick Clegg is not sorry about the AI revolution]
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